Môi trường kinh doanh của các hộ kinh doanh cá thể khu vực nông thôn Vĩnh Phúc và Bắc Ninh

THAI NGUYEN UNIVERSITY

Socialist Republic of Vietnam

SOUTHERN LUZON STATE UNIVERSITY

Republic of the Philippines

BUSINESS EMVIRONMENT OF OUSEHOLDS

IN THE RURAL AREAS OF VINH PHUC AND

BAC NINH PROVINCE

Name of Student : PHAM NGOC YEN

English Name : NANCY

Date of Birth : 09/07/1976

Course : SLSU-DBA1

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ACKNOWLEDGMENT

I would like to express my gratitude to the teachers of Post-Graduate Department of

Southern Luzon State University - Philippines. Thai Nguyen University and the teachers of

International Traning Centern – College of Agriculture and Forestry - Thai Nguyên

University, especially Dr.Nelly Mendoza, my dissertation advisor, for their generous

encouragement and support to finish this work.

I am grateful to Statistic Department of Vinh Phuc province and Bac Ninh province for

their enthusiastic support on collecting and processing the statistics. I am also indebted to

500 business households in those two provinces for their participation and informative

response they provided.

My finishing the dissertation would not have been possible without the emotional support

and encouragement from my management and colleagues at the University of Labour and

Social Affairs and General Statistics Office, as well as the unconditional love and support

from my family and my great friends.

Thank you all so much!

Author

Nancy - Phạm Ngọc Yến

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ABSTRACT

There have been a lot of studies on business environment. However, they concentrate only

on business environment of enterprises and companies of large scale, having their business

registration, or on business environment of a locality in general. The most noticeable one

among them is the research to build a Provincial Competitiveness Index (PCI) of Vietnam

Chamber of Commerce and Industry (VCCI) in combination with Vietnam

Competitiveness Improvement Project sponsored by the United States Agency for

International Development. PCI has become an important tool to measure and assess

business environment of private sector in 63 cities and provinces in Vietnam. The index

gets strongly active effect on improvement of business environment of the provinces. It

also helps local authorities find out obstacles for business of enterprises, especially

institution environment. More importantly, PCI helps provincial authorities to aware

importance of business environment improvement for their local enterprises, it is

considered an index reflecting capacity and efficiency of the local authorities.

However, the index has some certain limits on methodology. Firstly, the data were

collected from registered enterprises which are large-scaled and have experience and good

relations with local authorities, and normally operated in urban areas, but not including

business households (which play an important role in creating jobs and are vulnerable and

impacted by changes of the business environment). Therefore, difficulties they met may

differ from that of small-sized enterprises and business households.

In details, the nine factors impacting on business environment of the survey provinces in

the PCI include: Market entry cost; land access; transparency; time cost; informal chrges;

activeness of the State authorities; enterprise support service; human resource training;

legal policies. Some of these factors getting large impacts on business environment of

enterprises, such as time cost; legal policies … provide nearly insignificant impacts on

performance of business households, and vice versa, factors having large impacts on

performance of the households play no role in PCI (such as: capital).

Secondly, the data were collected from an indirect survey where a questionnaire was sent

to individual enterprises to get them filling into assessments and sending back. This may

cause a low accuracy of collected information (non-sample error).

On the other hand, in conformity to Vietnamese Law on Enterprises, a business household

has its corporate capacity as an enterprise. Therefore, the study method of PCI with

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changes for some factors to get them suitable with a study of business environment of

households has scientific basis.

It is known that Vĩnh Phúc and Bắc Ninh, the two provinces adjacent to Hanoi (Vĩnh Phúc

is bounded by the North of Hà Nội, Bắc Ninh is bounded by the East of Hanoi), have made

significant contribution to economic development of the capital city for the last years. In

conformity to the National Plan by 2020, the two provinces shall be important supports for

Hanoi to get a sustainable economic development. Vĩnh Phúc City and Bắc Ninh City (2

central cities of the two provinces) shall be satellite cities to help Hanoi settle issues of

environment, materials and human resources … Therefore, socio-economic development

of the two provinces gets much attention from the Government. Being a province of long￾standing culture with development of numerous traditional villages specializing in

bronzing, carpentry, ceramics …, Bắc Ninh has opportunities and challenges completely

different from that of Vĩnh Phúc, a province having a lot of villages and communes with

small trade of agricultural, forestry and aquatic products (rice, bean, peanut, vegetable ...)

in addition to its agricultural economy. Therefore, economic development of the province

can not be separated from development of household business. It is necessary to get a

favorable business environment for development of household business. In urban areas,

with development of enterprises of various types, business environment of the households

also has significant improvement. However, in rural areas, business environment of the

households does get much attention.

From the fact, the writer chooses the theme: “Study on business environment of

households in rural areas of Vĩnh Phúc Province and Bắc Ninh Province”.

The theme aims to study factors of the business environment impacting on

establishment and development of business households in rural areas of Vĩnh Phúc

Province and Bắc Ninh Province.

To study business environment of business households in rural areas of Vĩnh Phúc

Province and Bắc Ninh Province, the writer made a survey on 500 business households.

Sampling is made by the hierarchical random method, with layers of districts, communes

and households. In each province, 250 business households are sampled. Sampling is made

in 3 steps:

- Selection of districts: Five districts in a province were selected with proportional-to￾population-size (PPS) method on basis that the more business households the district had,

the higher the possibility to be sampled it had.

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- Vĩnh Phúc Province including: Lập Thạch, Yên Lạc, Vĩnh Tường, Tam Dương, and

Bình Xuyên Districts.

- Bắc Ninh Province indluding: Tiên Du, Từ Sơn, Quế Võ, Thuận Thành and Yên

Phong Districts.

- Selection of communes: PPS method was also applied to choose five communes in each

district.

- Selection of households: In a commune, ten business households were selected on basis

that the rate of households having business registration/the ones having no registration was

6/4.

The survey was completed in 2 weeks in each province. Data were input and cleaned by a

specialized software. The data then were dumped to a data processing software, Stata, to

make the analysis.

During the study, the formality index (FI) was built to assess business environment of the

households. The index was made on method of Building a Provincial Competitiveness

Index - PCI. The FI can be considered the weight mean value of component indexes

reflecting the local business environment. The two important issues in building the FI is to

determine component indexes and to estimate the weight of component indexes. Although

the FI method is similar to the PCI method, the study made some adjustments to some

factors during building the component indexes. In details: 3 factors “time cost; legal

institution; activeness of local authorities” in PCI were changed into the 3 factors:

“access to capital; business registration; support from State authorities” to get them

suitable to the business environment of the households.

In this theme, the weight of FI component indexes was estimated by a factor analysis and

regression.

Study results:

1. Analysis of business environment of households through survey data and Formality

Index (FI).

It is shown in the study that, in general, Vĩnh Phúc trends to get higher grade of component

indexes in comparison to Bắc Ninh. In addition, there is no significant difference between

communes of the two provinces for each component index. It is assessed by the business

households in the two provinces that their access to land gets less trouble than other factors

like capital, human resources and output market. Among factors of macro business

environment, market entry is accessed to be easy with insignificant informal charges.

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However, awareness and accessibility to legal policies on the households’ business is

assessed to be weak in the two provinces.

This study chooses indexes reflecting business development level, including profit,

turnover growth, and assessment of the households on their business performance.

Estimation of the indexes for the two provinces and districts under the survey shows that

profit, turnover growth rate and rate of the households having positive assessment on their

business in Bắc Ninh Province is higher than those in Vĩnh Phúc Province.

There is a huge difference among the three indexes in the districts. In general, in the

districts having a rapid economic growth rate, the business households have higher profit

and turnover growth rate, and they get better assessment on business development. In Vĩnh

Phúc Province, Lập Thạch and Yên Lạc are two districts of the highest profits and business

growth rate among the ones under the survey. In Bắc Ninh Province, Từ Sơn district has

the highest average profit, and Thuận Thành district has the highest growth rate among 5

districts under the survey. They are districts adjacent to Hanoi, with their developed

infrastructure system.

It is shown from the analysis that the factors of micro business environment including

accessibility to capital, input and output market of the households play the most important

role in the Household Formality Index. Accessibility to land also plays an important role

for business of the households. Support from State authorities for development of the

business households is considered an important factor for their development. Factors of

laws and informal charges have a small weight, showing their insignificant contribution to

competitiveness of the households.

Table 4.27: Weight of component indexes

Component indexes Weight (w)

Access to land 0.0895

Access to capital 0.2282

Access to human resources and inputs of production/trade 0.1423

Access to output market (Client) 0.1460

Access to infrastructure 0.0474

Market entry indexes 0.0484

Informal costs 0.0474

Transparency of information 0.0604

Support from State authorities 0.1915

Source: Estimation on basis of survey data

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The results show that value of the Household Formality Index ranges in 5,8 - 6,4. Vĩnh Phúc

has a slightly higher index in comparison to Bắc Ninh, (the FI is in score range of 10).

Table 4.28: Formality Index (FI) of provinces and districts

Vĩnh Phúc Bắc Ninh

Value Standard

error

Value Standard

error

In general 6.182 0.070 In general 6.101 0.058

Districts Districts

Lập Thạch 6.278 0.110 Yên Phong 5.882 0.107

Tam Dương 5.908 0.149 Quế Võ 6.087 0.141

Bình Xuyên 5.985 0.082 Tiên Du 6.118 0.116

Yên Lạc 6.184 0.112 Từ Sơn 6.403 0.115

Vĩnh Tường 6.234 0.149 Thuận Thành 6.075 0.110

Source: Estimation on basis of survey data

2. Assessment on impacts of business environment on business households’

performance.

* Factors impacting on business households’ performance

In order to assess impacts of business environment on business households’ performance,

econometric models are used with dependent variables of (1) Average monthly profit of

the business households in 2012; (2) Average monthly turnover of the business households

in 2012. Both of them directly reflect business performance of the households through the

most essential indicators of turnover and profit.

Model (1): Yi = β 0 +∑ j β i j Xi j + δ iDFIi

Where: Yi is average monthly profit of the households in 2012 (A)

Model (2): i = +∑ j i j i j +∑ k i k i k + i Y β β X θ I ε 0

Where: Yi is average monthly turnover of the households in 2012 (B)

As for independent variables: Xj is a vector reflecting internal forces of the business

households, including demographic characteristics of the households’ managers

(qualifications, age, experience), business characteristics of the households (number of

operation years, business registration, business lines), scope of capital, human resource and

business space area.

We can find that profit and turnover of the households are in direct proportion with labor

and capital. In general, business households of higher scope of laborers and capital trend to

get higher profit and turnover. Business households in trade sector trend to get higher

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profit than the households in industry or construction. Experience of the managers is

directly proportional to profit and turnover. Business households with female managers

trend to get lower profits. Households with business registration trend to get higher

turnover in comparison to those having no business registration. Similarly, business

households in Bắc Ninh trend to get higher turnover than that in Vĩnh Phúc with no clear

impact on their profit. On the other hand, impacts of DFI in the models are clear and have

their statistic meanings. It is shown in the results that, on average, if the districts get their DFI

increased with 1%, then the households shall get an increase of 3,3% for their profit and

increase of 8,4% for their turnover.

* Factors impacting on conversion into enterprise business

It is shown in the study that only 13,3% of business households with business registration

intends to converse into enterprise business. 56% of them are not aware of benefits of the

conversion. To get a more thorough study on impacts on their decision to converse into

enterprise business, we use the same econometric model as mentioned above:

Where, is a binary variable, with a value of 1 if the households have intention to

converse into enterprise business and a value of 0 if not.

The model provides some facts that younger the younger the managers are, the higher the

intension of conversion is. Female managers get higher intention of conversion than male

managers. Business households in trade and service have lower intention of conversion

than that in industry/construction. Meanwhile, capital scope has a significant impact on the

trend of conversion into enterprise business: the higher capital scale is, the higher the trend

of conversion is. The households using loans have higher trend of conversion. The results

are proper, because in general, the households using loans are the ones having higher

capital scope or having their plans for business development. On the other hand, scope of

business space and human resource has no clear relation to the intention of conversion.

DFI gets an active impact on the decision to converse into enterprise business. However, it

is shown in the analysis of component indexes that a better market accessibility and a low

index of market entry have an active impact on the decision of conversion. We can see in

the results that opportunities in the output market have a significant impact on the business

households. When the output market is potential and accessible, the households trend to

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decide to converse into enterprise business to take full advantage of the market

opportunities.

Among factors of macro economic environment, only the index of “Assistance from State

authorities” has its statistic meanings. “Assistance from State authorities” is actually the

households’ viewpoint on activeness of local authorities. In localities where the business

households have a positive view on the role of State authorities in their business

performance, the households are more possible to converse into enterprise business than in

other places.

* Factors impacting on decision to get business registration

Among the survey samples, there are 270 households having business registration and 230

households having no business registration. Among the households without business

registration, only 21% of them have intention to get their business registration. To study

factors impacting to decision to get business registration of the households without

business registration certificates, an econometric model is applied, with the dependent

variable of value 1 if the household has intention to get business registration and of value

0 if the household has no intention to get business registration.

The results show that scale of capital has a significant impact on the households’ decision

to get business registration. It means that business households of higher capital trend to get

more intention to register their business in comparison to that of lower capital. Business

households with no loan have more trends to formalize their business than the ones with loans.

Furthermore, land impact has a reverse relation, that is, business households with small

business space have higher trend to get business registration than the ones with larger business

space. A reason for this lies in the fact that the formalization shall help the households get

loans and hire/purchase land more easily, solving their existing difficulties for capital and land.

Households having managers with high school education or higher trend to get business

registration more than the ones having managers with lower education. Business

households in service have higher trend to get business registration in comparison to the

others.

Therefore, in localities having favorable environment for the households to enlarge their

business space and easily employ high quality laborers, the households have higher trend

to get their business registration. On the other hand, the households having difficulties in

accessing to the output have higher trend to get business registration. The reason lies may

be that in localities having difficulties in accessing to the output market, and formalization

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of the business shall help the households get better voice, and get more trust from

customers, and get easier in transacting with customers and finding their markets.

Summary of Findings

1. On basis of collected information from the survey on business environment in Vĩnh

Phúc and Bắc Ninh provinces, the thesis gets an analysis on business environment of the

households in the two provinces through analyzing components of the business

environment. It is shown that the business households are facing with difficulties: limited

borrowing capacity, narrow business space and low quality human resource. Moreover,

market price fluctuation and limited infrastructure, especially electricity and road system,

provide numerous difficulties for the business households. Although informal charges of

the households are insignificant, the assistance from State authorities is also insignificant.

2. The main method applied by the writer to define the formality index is based on the

provincial competitiveness index (PCI) on business environment for private economic

sector annually built by VCCI. The main point here is how to select components of

business environment so as to be suitable with business households. From qualitative

studies in the survey area and quantitative studies, the writer believes that the research

selected the most exact components of business environment of the households in rural

areas of the two provinces.

3. The most important result of the research is that the writer, on basis of the collected

information, could define a set of indexes to evaluate competitiveness of business

environment in Vĩnh Phúc and Bắc Ninh. A remarkable point in this research is that the

indexes can be defined at district level. Basically, the results are similar to the provincial

competitiveness index built by VCCI.

4. According to the analysis, factors of input access and output access of the business

households play the most important role in the competitiveness index of the households.

The factors get direct impacts on business performance of the households, and they are

main factors to promote competitiveness of the households. The next important ones

playing an important role for business performance of the households are capital and land.

However, legal stipulations and informal charges get a small weight in the general

competitiveness index, proving an insignificant contribution to competitiveness of the

households. In order to improve competitiveness of the households, the State should

provide convenience for access to output market, inputs, capital and land of the

households.

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5. It is shown by the analysis that the formality index at district level and commune level is

in the range of 5.9 to 6.6. Vĩnh Phúc has the index of 6,18 which is higher than that of Bắc

Ninh (6.15) show that the business environment of the business households in rural area in

Vinh Phuc is better than business environment of the business households in Bac Ninh.

The result is similar to the Provincial Competitiveness Index (PCI) of year 2010 built by

VCCI. In details, PCI of Vĩnh Phúc and Bắc Ninh is 66.7% and 65.7% respectively (in a

score range of 100%, and FI in a score range 1 of 10).

6. The researcher used modeling method to determine factors impacting on business

performance of the households in the two provinces. Another important objective of the

research to clarify the households’ decision to get business registration or not and to

convert into a enterprise business or not was also made by the modeling method in

combination with the normal statistical analysis methods. It is shown that the households’

decision to convert into enterprise business or not and to get business registration or not is

significantly impacted by business environment factors: labor access, market access and land

access. Meanwhile, the role of macro environment factors is limited.

7. The writer believes that the research results are meaningful and satisfactory in

evaluating business environment of the households in the two provinces. However, the

research was conducted in a small scale, in the two provinces of similar socio-economic

features, so the picture of the households’ business environment cannot be generalized in a

national scale.

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LIST OF ABBREVIATIONS

GDP : Gross Domestic Product

FI : Formality Index

DFI : District Formality Index

PFI : Provincial Formality Index

PCI : Provincial Competitiveness Index

VCCI : Vietnam of Chamber of Commerce and Industry

VNCI : Vietnam Competitiveness Initiative

GSO : General Statistics Office

IPSARD : Institute of Policy and Strategy for Agriculture and Rural

Development

MOLISA : Ministry of Labour, Invalids and Social

IRC : Indochina Research and Consulting company

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LIST OF TABLE

Table 4.1: Gender, qualification, experience of the managers ............................................41

Table 4.2: Number of laborers in sectors/ provinces ...........................................................42

Table 4.3: Fixed capital, working capital in sectors/ provinces...........................................43

Table 4.4: Turnover, profit in sectors/provinces..................................................................43

Table 4.5: Rate of households with intention of business expansion ..................................45

Table 4.6: Quality, recruitment and training of laborers .....................................................46

Table 4.7: Quality and accessibility of inputs......................................................................46

Table 4.8: Accessibility to bank loans.................................................................................49

Table 4.9: Value of loans and rate of loan sources..............................................................49

Table 4.10: General assessment on bank loans....................................................................50

Table 4.11: Land area and rate of the households in form of land use................................51

Table 4.12: Capacity of business space enlargement ..........................................................51

Table 4.13: Land Use Right Certificate...............................................................................52

Table 4.14: Main reasons for obstruction of business space enlargement...........................52

Table 4.15: Market Access and competition .......................................................................53

Table 4.16: Importance of infrastructure .............................................................................54

Table 4.17: Assessment on quality of infrastructure services .............................................56

Table 4.18: Rate of households accessing and using other services....................................57

Table 4.19: Taxes and tax inspection...................................................................................60

Table 4.20: Assessment of the households on State officers and authorities ......................62

Table 4.21: Accessibility to information, documents..........................................................64

Table 4.22: Role of local authorities in product sale ...........................................................65

Table 4.23: Average value in score range of 9 component indexes ....................................68

Table 4.24: Contribution of component indexes for variance of the 4 factors ....................69

Table 4.25: Average value of variables reflecting the households’ business performance.70

Table 4.26: Regression analysis...........................................................................................71

Table 4.27: Weight of component indexes ..........................................................................71

Table 4.28: Formality Index (FI) of provinces and districts................................................72

Table 4.29: Average statistic value of variables used in the econometric models ..............78

Table 4.30: Impacts of business environment on profit and turnover .................................79

Table 4.31: Conversion into enterprise business of the business households .....................82

Table 4.32: Factors impacting on the households’ decision to converse into enterprise

business................................................................................................................................84

Table 4.33: Business registration of sole business households ...........................................87

Table 4.34: Awareness of benefits from business registration and reasons provided by the

households without business registration for their lack.......................................................88

Table 4.35: Factors impacting on the households’ decision to get business registration ....90

Table 1 Appendix 1: The weight of component indexes with different methods..............103

Table 2 of Appendix 1: Formality Index (FI) with with different methods.........................104

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LIST OF FIGURES

Figure 1.1: Number of non-agricultural business household and employees in non￾agricultural business household in 2004-2012 period. (Unit: thousand household, thousand

employee)...............................................................................................................................2

Figure 1.2. A diagram showing the conceptual framework of the study...............................0

Figure 1.3. The figure shows that business environment of the households including 9

factors that has been changed to impact business results of the household...........................6

Figure 4.1: Business situation in 2012 compared to 2011...................................................44

Figure 4.2: The capital source structure of the business households...................................48

Figure 4.3: Informal costs for state employees in total income of business households.....62

Figure 4.4: Assessment on attitude of the authorities to operation of business households 65

Figure 4.5: Assessments of the households on local authorities..........................................66

Figure 4.6: The trust of business households in the court system .......................................67

Figure 4.7: Provincial Formality Index (PFI) and District Formality Index (DFI) .............73

Figure 4.8: The business results of the households and formality indexes..........................76

Figure 1 Appendix 1: The weight of component indexes with different methods ............103

Figure 2 of Appendix 1: Formality Index (FI) with different methods .............................105